Support and resistence

g INTRODUCTION

Technical analysis is a financial markets technique that claims the ability to forecast the future direction of security prices through the study of past market data, primarily price and volume.

In the foreign exchange markets, however, its use may be more widespread than "fundamental" analysis. While some isolated studies have indicated that technical trading rules might lead to consistent returns in the period prior to 1987, most academic work has focused on the the nature of the anomalous position of the foreign exchange market. It is speculated that this anomaly is due to central bank intervention.

Most academic studies say technical analysis has little predictive power, but some studies say it may produce excess returns. For example, measurable forms of technical analysis, such as non-linear prediction using neural networks, have been shown to occasionally produce statistically significant prediction results. A Federal Reserve working paper regarding support and resistance levels in short-term foreign exchange rates "offers strong evidence that the levels help to predict intraday trend interruptions," although the "predictive power" of those levels was "found to vary across the exchange rates and firms examined."

= Support



= Resistence
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